Financial Daily from THE HINDU group of publications
Thursday, Feb 19, 2004
Industry & Economy
Nagarjuna Power seeks tariff approval for supply to Kerala
Bangalore , Feb 18
NAGARJUNA Power Corporation Ltd (NPCL), which is setting up the 1015 MW Mangalore project, has sought the Central Electricity Regulatory Commission's (CERC) approval for tariffs for power supplies to Kerala.
Sources said that currently the estimated tariff for the project based on current cost and exchange rates was estimated to be in the region of about Rs 2.35 a unit.
The tariff is based on current exchange rates and international coal prices.
However, the sources added, these estimates could undergo a change. An appreciation of the exchange rate, the sources would bring the tariff down further, they added.
The sources said that the new tariffs had been fixed on the basis of a 16 per cent rate of return on a 80 per cent plant load factor, as against the original norm of 68.5 per cent PLF.
Besides, the incentive element was also brought down to 0.4 per cent for every increase in the PLF, as against the original norm of 0.7 per cent.
The original norms were fixed on the basis of the two-part power tariff notification issued in 1992.
These changes would have to be incorporated in to power purchase agreement signed with Karnataka Power Transmission Corporation Ltd (KPTCL). The sources said that at the last meeting, this week, the financial institutions had set the tentative deadline of April this year for the project's wet financial closure. Wet financial closure implied the readiness of the project lenders to release the debt funds.
By this date, NPCL, the sources said, would have finalised the strategic equity investor in the project. The strategic investor is expected to bring in at least 49 per cent stake, though the major stakeholders in the project would be Nagarjuna Fertiliser Corporation Ltd and its group companies. These entities together would continue to hold about 51 per cent of the project equity.
The overall project cost is currently estimated at Rs 4,400 crore for a greenfield project. The sources said that the financial institutions had accepted the payment security mechanism (PSM) cleared by the Karnataka State Government for meeting the project debt financing amounting to about Rs 3,080 crore.
The approved PSM included an irrevocable letter of credit up to 85 per cent of the PLF, an escrow cover for 70 per cent of the project cost (project debt) and a State Government guarantee.
Power Finance Corporation (PFC), the sources said had also agreed to finalise the covenants for the deferred payment guarantees (DPG) on the basis of cleared PSM.
PFC is also the lead arranger for the for project debt. The DPG was required for funding of the engineering procurement and construction contract.
The estimates included the cost of the flue gas desulphurisation plant, in line with guidelines of the Environment Ministry and the coal handling facilities near the project site, the sources added.
Coal is to be supplied by PT Adaro of Indonesia and Rio Tinto of Australia. PT Adaro is among the world's largest suppliers of "Enviro coal" or low-sulphur coal (0.1 per cent sulphur and 1.2 per cent ash). The clearances would ensure the project commissioning before the end of the current Plan period.
When completed in 2005, the NPCL project would be the first private sector mega power station in the southern region.
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